[Policy & Planning] The National Skill Mission and the Indian Economy: an Appraisal

Skills and knowledge are the driving forces of economic
growth and social development for any country. Countries with higher and better
levels of skills adjust more effectively to the challenges andopportunities of
world of work.

Prime Minister Narendra Modi launched the National Skill
Development Mission on July 15, which happens to be the first ever World Youth
Skills Day. He unveiled the new National Policy for Skill Development and
Entrepreneurship-2015 and rolled out on an all-India basis the
government’s flagship scheme Pradhan Mantri Kaushal Vikas Yojana.

National Policy on Skill Development (NPSD) approved by the
Government has set a target to skill 500 million persons by the year 2022.
Concerned central Ministries will involve respective departments of state
Governments and other stakeholders to achieve the target. The details
of target for different Ministries/Departments is MoL&E would train
100 million and the same is planned to be achieved through the following
schemes:

Name of the
Scheme
Target

Craftsmen Training
Scheme 29.4 mn

Skill Development
Centres
57.2 mn

Apprenticeship Training Scheme 05.4 mn

Skill Development Initiatives through MES 11.0
mn

DGE&T field
institutes 0.5 mn

Total 103.5 mn

NSDM is an ambitious scheme to tackle the problem of
unemployment rampant in India due to low-skilled people. Along with other
schemes such as Pradham Mantri Kaushal Vikas Yojna, Skill loan schmes and
National policy for skill development and entrepreneurship,it aims to reap the
demographic dividend of India by providing adequate institutions and
opportunities for the youth. It seeks to include Industrial Training
Institutes(ITI), Vocational training at school level, and polytechnics to
achieve its mission.

Skills development is an area that spans across all sectors
of the economy. From manufacturing to services and agriculture, skilled labour
is a key requirement to fuel the growth engine of any economy. The key
stakeholders in skills development are the Industry (both the Service and the
Manufacturing sectors), labour, Academia, and the Government. Growth and
productivity in any part of the value chain in a sector will substantially
contribute to the national economy and automatically attract FDI inflows.
Productivity is directly affected by the efficiency of labour and capital
inputs. Therefore, labour needs to be sufficiently skilled as per the changing
industry dynamics, in order to contribute to growth. India has seen increased
FDI inflow in recent years especially in the manufacturing sector. SSCs (Sector
Skill Councils) have been set up across various sectors such as automobiles,
retail, security services, food processing and so on, to bring together all the
stakeholders on to one platform. The NSDC is the leader in setting up of these
SSCs.

India’s skill development initiatives of skilling
approximately 500 million people will not only benefit India but also make
India the ‘global manpower hub’. Among the developing countries of the world,
India has the highest potential to meet the skill gap with its large, young,
English speaking population. The world shortage of skilled manpower will stand
at approximately 56.5 million by 2020 . With a target of skilling 500mn by
2020, India can not only fulfil its own requirements but can also cater to the
labour shortages in other countries such as the U.S., France and Germany.
Presently 80% of the workforce in India (both rural and urban) does not possess
any identifiable or marketable skills. Therefore, bridging this gap (through
the various skill development initiatives) could make India the global hub for
skilled manpower, and also result in a surplus of skilled manpower of
approximately 47 million by 2020.

India’s workforce, the second largest in the world after
China, needs to be trained across four levels, from the ‘White Collar’ workers
to the ‘Rust Collar’ workers, linking them to job opportunities and market
realities. The skills challenge becomes acute for India considering that the
country has a large portion of its population below 25 years of age. This young
population can be transformed into a productive workforce giving the Indian
Economy a ‘Demographic Dividend’. Currently a major proportion of this
population is not productively engaged in economic activities due to a ‘skills
v/s jobs requirement’ mismatch. The skills v/s jobs mismatch often leads to
economically inactive working age group people. This not only impacts the
economy, it also has serious consequences for the society at large. Social
unrest such as insurgency, red belt has been witnessed in several areas of
India should be heeded with a measure of urgency.

The world (both developed and developing economies) is
experiencing an ever widening gap between the demand and supply of skilled
labour. The world’s population is growing old. By 2050, the world population of
people above 60 years will hit the 1.3 billion mark. This trend will lead to
the widening of the demand-supply gap, especially in the developed nations like
America, Germany and France. On the other hand, India is emerging with one of
the youngest populations in the world comprising of a highly mobile, English
speaking population. India will have a 2 billion sized English speaking work
force by the end of 2020. Training such a workforce will imply that India can
become the major exporter in the services sector as well as an exporter of
manpower itself. It is estimated that by 2022, India will face a demand of 500
million skilled workers. India could look at preparing the workforce for global
opportunities so that it can utilise its premium position as the human resource
reservoir. Given the dynamic labour markets it is also important that the
workforce learns and readies itself as quickly as possible. To reap the
benefits of “demographic dividend”, the Eleventh Five Year Plan had favored the
creation of a comprehensive National Skill Development Mission. As a result, a
“Coordinated Action on Skill Development” with three-tier institutional
structure consisting of (i) PM’s National Council (ii) National Skill
Development Coordination Board (NSDCB), (iii) National Skill Development
Corporation (NSDC) were created in early 2008. Whereas, Prime Minister’s
National Council on Skill Development has spelt out policy advice, and
direction in the form of “Core Principles” and has given a Vision to create 500
million skilled people by 2022 through skill systems (which must have high
degree of inclusivity), NSDCB has taken upon itself the task of coordinating
the skill development efforts of a large number of Central Ministries/Departments and States. The NSDC has geared itself for preparing
comprehensive action plans and activities which would promote PPP models of
financing skill development.

As per the approach paper to the 12th five year plan the
quality of employment in organized sector is generally high though the scope of
additional employment generation in this sector is rather limited. Significant
employment generation is taking place in tertiary sector, particularly, in
services industries. Self-employment and small business continue to play a
vital role in this regard. It is, therefore, necessary to promote main
employment generation activities like

Private sector could work in greater coordination and come
together to address this issue. And it is important that both sectors
compliment each other’s efforts. The corporate houses could participate
actively in industry led skill development programmes and by channelizing funds
allocated for corporate social responsibility into funding and supporting the
skills development initiatives by the government. They could be instrumental in
moulding and evolving the existing skills development infrastructure in India
as per the changing market dynamics, which only the industry has the best
knowledge about. International collaborations could help capture the learning’s
of the sector and also creating PPP models that are around the implementation
of skills programs. The knowledge transfer focus on sharing the experiences of
success as well as failures which has helped in the evolution of the skills
systems in different countries. India Inc needs to reach out to the teeming
millions. The economic implications in terms of the opportunity cost of not
timely training the swelling workforce will be very high. Lack of skilled
workforce may slow down productivity, research and development and ultimately
lead to reduced international market share, which may be very difficult to
regain if we fall behind in the race. We may permanently loose momentum and the
demographic dividend may end up becoming a demographic liability. However
tapping this opportunity may not only have the potential of positioning us
ahead in the race but can also position as game changers.